Gym Group PLC · LSE:GYM
Gym — The Gym Group — Investor Day (June 2017)
45 slides from Gym's investor day presentation, June 2017
Slide 1: Capital Markets Day June 2017
The Gym Group plc CAPITAL MARKETS DAY JUNE 2017
Slide 2: Forward-Looking Statement Disclaimer
Forward-Looking Statement Disclaimer This presentation and information communicated verbally to you may contain certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of The Gym Group plc. These statements are
Slide 3: Agenda
Agenda Introduction John Treharne, CEO Market Opportunity John Treharne, CEO Technology Jasper McIntosh, IT and Digital Director Commercial and Marketing Barney Harrison, Commercial and Marketing Director Rollout David Melhuish, Head of Property Development Financial Model Richard Darwin, CFO Tradin
Slide 4: Lewisham Site Visit
Lewisham Site Visit • New build mixed use development Opened Square footage P&L rent psf Current membership • Close to railway station, DLR and bus station OCT 16,600 <£12 2016 £17.99 3
Slide 5: Our Journey So Far
Our Journey So Far Gyms (#) Revenue £’m 94 89 73.5 74 60.0 55 45.5 40 35.7 32 1 5 16 22.3 10 2008 2009 2010 2011 2012 2013 2014 2015 2016 May-17 2012 2013 2014 2015 2016 Members (‘000) Group Adjusted EBITDA £’m 22.7 507 448 17.0 376 14.7 293 11.8 225 166 6.0 7 26 96 58 2008 2009 2010 2011 2012 2013
Slide 6: Investment Proposition
Investment Proposition £ Technology-led Compelling customer High quality Attractive financial Market opportunity business model proposition gym estate model Investment Low cost segment Investment in Attractive low cost Disciplined site High returns on capital, rationale leading the growth technology
Slide 7: The Right Team for Growth
The Right Team for Growth BOARD John Treharne Other people Chief Executive here today David Melhuish Nick Henwood Barney Harrison Jasper McIntosh Jonathan Spaven Richard Darwin Head of Property Operations Commercial & Marketing Technology Property Finance Development Becky Tummey • Operational revie
Slide 8: Market Opportunity
the MARKET OPPORTUNITY A |
Slide 9: Market Opportunity
Market Opportunity Investment rationale Results to date Developments and insights A rapidly growing market, driven by the low cost segment Number of low cost gyms1 1 • Local authority segment experiencing decrease in spending Scope for the market to double 450 515 • Consolidation of the over the com
Slide 10: The Current Market
The Current Market Market growth driven Limited growth from Public membership by low cost traditional providers stagnant 515 Number of 1,427 5 year CAGR 44% 5 year CAGR 0% 5 year CAGR 1% 2,709 UK gyms 2.2 6,728 1.9 4.2 4.1 4.1 4.1 4.0 4.2 3.3 3.3 3.4 3.3 3.1 3.2 2,077 1.3 0.9 0.7 Low cost 0.4 Tradit
Slide 11: Low Cost - an Alternative to Local Authority Provision
Low Cost - an Alternative to Local Authority Provision England local authority recreation and sport spending1 £'m Number of public gyms2 Public gyms2 The Gym Group 16% AVERAGE MEMBERSHIP FEE 1,326 decrease in local 2,762 authority recreation and sport spending 2,750 2,753 £30 £17 1,268 AVERAGE NUMBE
Slide 12: Growth of the Top Low Cost Operators
Growth of the Top Low Cost Operators Low Cost Development UK Ownership Mar ’16 – Mar ’171 (Number of clubs) 24/7 structure Consolidation of the mid market 2 Pure Gym 147 174 O • LA Fitness brand acquired by Pure The Gym 75 91 O Gym in 2015 energie Fitness 3 48 58 O/F • Fitness First sold in 2016. Pu
Slide 13: London Low Cost Leader
London Low Cost Leader London Low Cost Market Share 1 Average Headline Price2 Number of sites charging <£25 The Gym Group £19.80 True low cost 2 21 Fitness4Less £19.90 provider 5 within London The Gym Group Xercise4Less £19.99 Pure Gym 8 32 Tru Gym £19.99 Energie Fitness Sports Direct Fitness £19.99
Slide 14: Clusters of Sites
Clusters of Sites Distance Distance between sites: between sites: 5.5 miles 3.1 miles Competition openings The Gym The Gym Competition opening openings opening Forming local clusters of sites helps to cement position in local market Opening of additional gyms in close proximity to mature gyms result
Slide 15: Technology
the TECHNOLOGY
Slide 16: Technology
Technology Investment rationale Results to date Developments and insights Technology is central to the business model and facilitates Website sessions (millions) 20 1 • Amanagement new scalable member system and digital platform due to launch this year our low cost, high margin 15 in readiness for t
Slide 17: Technology is Central to our Business Model
Technology is Central to our Business Model • Technology is a key enabler of The Gym Group’s low cost, 24/7, online model Surveys, Site selection • Data is a unique asset; high quality, Online joining ratings comprehensive and owned by The Gym process and social media Group • Key focus on security o
Slide 18: New Member Management System and Digital Enablement Platform
New Member Management System and Digital Enablement Platform Website Future channels Other inputs Key (e.g. app, kiosks) (e.g. fitness related hardware) In use / under development Salesforce Future applications Marketing Cloud Business logic and integration Member management system BI platform Data
Slide 19: Programme benefits
Programme benefits • Increased supplier capacity • Upskilling across design and development • Test and learn optimisation • Personalisation capability • Product and promotion launch speed • Supports diversification of product • Better insight through data • Improved security A platform • Wider suppo
Slide 20: Commercial and Marketing
COMMERCIAL SN), AND MARKETING
Slide 21: Commercial and Marketing
Commercial and Marketing Investment rationale Results to date Developments and insights Until now: A compelling low cost product and a proven Members (‘000) 1 • Improved yield management through pricing • Enhancements to pre-opening method of member acquisition 448 507 marketing 376 successfully fil
Slide 22: Improved Yield Management through Pricing
Improved Yield Management through Pricing • Retain the principle that the longest serving members get the best price Proven Method of Member Acquisition • Highly localised • Central review of repricing opportunities by • Drives visits to the gym to view, or to the website the data and insight team t
Slide 23: Enhancing Launch Marketing
Enhancing Launch Marketing Flexibility Messaging • Experience shows reaction to pre- • Updated messaging to drive action open marketing differs depending on and sense of urgency customer familiarity with the low cost • Traditional and new locally targeted proposition channels • Increased flexibility
Slide 24: Enhancing CRM using Technology
Enhancing CRM using Technology Join Early Life In Life Grow prospect conversion Increase visits during early life to Enforce habits to drive ongoing • Opportunities presented by new reduce risk of cancellation engagement and tenure website: • Use joining survey to feed • Segmentation model drives me
Slide 25: Rejoiners and Customer Satisfaction
Rejoiners and Customer Satisfaction Attrition • Flexible membership model: leaving as easy as joining • Key consideration for students and first-timers • Members have multiple join/cancel/rejoin cycles over a number of years • Member satisfaction, monitored through Net Promoter Score, is key to enco
Slide 26: Improving the Look and Feel
Improving the Look and Feel Clean, uncomplicated branding Adding excitement whilst helping to reinforce the no-frills concept Bringing more life to the brand members navigate the gym ‘Zoned’ Original branding 35 SITES Second generation branding 34 SITES branding 24 SITES All sites brought up to most
Slide 27: Developing the Proposition
Developing the Proposition Role of the product and proposition team Research and trials taking Using our 9 years of expertise to deliver new and innovative products: place and to come Ideation Planning Research Business Deliver • Individual fitness plans (My Fit) cases ‒ To support ‘Early Life’ stag
Slide 28: Premium Pricing
Premium Pricing • Lessons learned from review of international peers Planet Fitness Black Card • $19.99 per month • The Gym Group will develop our own premium • Access to all franchise locations pricing product with market leading content • Unlimited guest access to any location • Unlimited use of m
Slide 29: Rollout
the ROLLOUT
Slide 30: Rollout
Rollout Investment rationale Results to date Developments and insights An adaptable concept and a disciplined approach to site Number of sites 1 • Flexible approach to space means that the range of types 94 of space we convert continues selection that achieves high Sites now open to expand 89 return
Slide 31: Flexible and Disciplined Approach
Flexible and Disciplined Approach Selective acquisition criteria to deliver strong returns P&L Rent psf 2016 1 Desirable covenant • Location Inside M25 £11.90 • Dun & Bradstreet ‒ Transport links Outside M25 £8.80 5A1 rating ‒ Visibility Total estate £10.00 • Demographics • Plc status ‒ Population d
Slide 32: Real Estate Market Opportunities
Real Estate Market Opportunities • Retailers and landlords seeking alternative uses Sites to 2016 10% New build for excess space 6% 34% Offices (89 sites) • Enhancing value of new developments Leisure Retail 28% ‒ Mixed use 11% Industrial / car park Gym 11% ‒ Retail • Purpose built units Sites to 20
Slide 33: Opportunities Arising from the Retail Sector
Opportunities Arising from the Retail Sector Edinburgh Murrayfield Walthamstow • First floor within Sainsbury’s • Former BHS site • Dedicated entrance • First floor of main shopping centre • Large car park • Directly opposite tube station • Good visibility and signage opportunities • Highly visible,
Slide 34: Effective Uses of Space
Effective Uses of Space Blackpool Bristol Longwell Green • Previously 1930s-built car park • Former Fitness First site • Close to rail, tram and bus links • Rapid fitout and opening • Excellent signage opportunities • Sensible rent (passing rent < £6.50 psf) • £1.24m fitout cost • 22,000 sq. ft. • 1
Slide 35: Smaller Catchments: Adapting the Model
Smaller Catchments: Adapting the Model Current catchments Extending the model Ashford • Current estate has: • 150 potential towns with small catchments of • 9,800 sq. ft. ‒ Smaller catchments: 75,000 – 150,000 50,000 adults within 15 mins. Scope to adults within 15 min drive increase addressable mar
Slide 36: Financial Model
the FINANCIAL MODEL
Slide 37: Financial Model
Financial Model Investment rationale Results to date Developments and insights • Reductions in capital costs in The financial model drives high returns on capital which have Average EBITDA per Mature site 1 all areas: equipment, tender negotiations, fit out content been maintained even as the £480k
Slide 38: Financial Model
Financial Model Mature site metrics 2016 Revenue £1.00m High returns on capital Gross profit 99% • Increase in ROCE for mature sites to 32% Fixed property costs 26% • Absolute mature EBITDA per site Other opex 26% improvement EBITDA £0.48m • ROCE consistent across cohorts EBITDA margin 47.5% Average
Slide 39: Cost Reductions in All Areas
Cost Reductions in All Areas Cost reductions in all areas of the fitout process Average capital cost per site £‘m • Competitive tender processes for main contractors • Negotiation of volume discounts • Management of supply chain • Improved specification of: 1.48 10% ‒ Lighting and heating Decrease 1
Slide 40: Maintenance Cycle
Maintenance Cycle Pre 2014 Sites 2014 and Later Sites 2014 and Later Sites YEAR Overall maintenance YEAR Overall maintenance • Experience gained from earlier 2-4 £50k 2-4 £50k fitouts: lower requirement for ongoing maintenance capex YEAR Cardio equipment YEAR Cardio equipment ‒ Longer lasting shower
Slide 41: Maintenance Cycle as a Source of Competitive Advantage
Maintenance Cycle as a Source of Competitive Advantage Nottingham Leeds Headrow • Opened Q4 2010 • Opened Q2 2011 • Refurbished Q4 2015 • Refurbished Q2 2016 ‒ Extension to free weights area ‒ New light weights area ‒ 2 new functional zones ‒ New functional zone Before Before ‒ Rebranding ‒ Rebrandi
Slide 42: Trading Update
Trading Update • Trading for first five months of the year has met the Board’s expectations • Profit for full year 2017 anticipated to be in line with consensus market expectations • Six new sites to have opened by the end of H1 2017 • Total members at 31 May 2017 of 507,000 +19.6% vs H1 2016 • Aver
Slide 43: Summary
Summary £ Commercial and Market Technology marketing Rollout Financial model • Opportunities arising from • New Member Management • Developments to our • Flexible approach to space • Reductions in capital cost in local authorities and the mid system marketing and CRM all areas • Opportunities from e
Slide 44: Appendix
the APPENDIX A |
Slide 45: Financial Record
Financial Record £’m 2016 2015 2014 2013 2012 15-16% change Financial Revenue 73.5 60.0 45.5 35.7 22.2 22.6% Group Adjusted EBITDA 22.7 17.0 14.7 11.8 6.0 33.4% Group Adjusted EBITDA before POC 24.9 19.7 16.7 12.9 7.6 26.5% Group Operating Cash Flow 24.9 18.6 16.5 14.8 9.6 34.4% Group Operating Cash